Applied Statistics

for Business & Economics

Prepared for
Magister Management Class
Esa Unggul University

Prepared by
Diana Fajarwati
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About Me
Diana Fajarwati
Major Working Experience

2008 – Now : Prompt Research

2014 – Now : The Partner Consulting

Education

2007 : S2 Marketing UI
2016 – Now : Doctoral Program di Strategic Management UI
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Lecturer Planning

 Matriculation on Applied Statistics conduct in 4 session

 The methods combine : lecturer presentation, case
study analysis, personal homework and presentation
 Time Planning
 30 minute : 3 students presentation, including Q&A
 90 minute : Main presentation, Case Analysis and Q&A
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Syllabus
Session 1 :
Introduction to Statistics
 What is statistics good for you ?
 Some further application on statistics
 Some basic statistical ideas
Session 3 :
Probability
 Basic probability & probability distribution
 Sample & Sampling distribution
 Estimation & Confidence interval

Session 2 : Session 4 :
Describing Data Sampling & Basic Analysis
 Table and graph  Data collection
 Summary Statistics  Parametric and non parametric
 Regression
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Book References
 Session 1

Introduction to Statistics
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What is statistics
good for you ?

Imagine you are playing a board

game with some friends and a die
seems to be coming up “1” too
often.
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Or imagine it is your first day on the

job. Your boss drops some
spreadsheets on your desk and
says: “Here’s something to start on.
See what sense you can make of
these.”

What do you do?

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1st Case : Probability Contexts

You know intuitively that, if the die is fair, each of

the six possible outcomes should come up about
the same number of times. But, due to chance,
not exactly the same number of times.

So how close is close enough?

Statistics offers a formal framework for making decisions like this.

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2nd Case : What the data about ?

Is there a particular dependent
variable whose variation he
would like to understand?
Count on getting such vague
instructions, though.

You will need to look at

the data and think for
yourself.
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Statistics is the science of collecting, organizing,

analyzing, interpreting, and presenting data. Some
experts prefer to call statistics data science, a trilogy of
tasks involving data modeling, analysis, and
decision making.

A statistic is a single measure, reported as a number,

What is used to summarize a sample data set.

Statistics ?
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Why Study Statistics ?

In a 2006 WSJ survey, recruiters said that
the top five attributes were :
1. communication and interpersonal
skills;
2. ability to work well within a team;
3. personal ethics and integrity;
4. analytical and problem-solving
skills; and
5. work ethic.
(See “Why Math Will Rock Your World,” BusinessWeek,
January 23, 2006, p. 60; and The Wall Street Journal,
Sept. 20, 2006.)
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Statistics in Business
You’ve seen why statistics is important. Now let’s look at some of the ways
statistics is used in business.

1. Audits
A large fi rm pays over 12,000 invoices to suppliers
every month. The firm has learned that some invoices
are being paid incorrectly, but they don’t know how
widespread the problem is. The auditors lack the
resources to check all the invoices, so they decide to
take a sample to estimate the proportion of
incorrectly paid invoices.

Questions :
How large should the sample be for the auditors to
be confident that the estimate is close enough to
the true proportion?
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2. Political Polling

Political polling is really just market research in a

different context. A political poll is just a sample,
from which one tries to infer the political position of
the larger electorate.

One thing that can make it feel a little different is the

way bottom line poll results—who is ahead and by
how much—are often reported publicly
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3. Marketing

A marketing consultant is asked to identify likely

repeat customers for Amazon.com, and to
suggest co-marketing opportunities based on a
database containing records of 5 million Internet
purchases of books, CDs, and DVDs.

How can this large database be mined to reveal

useful patterns that might guide the marketing
strategy?
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4. Market Research

It can be very expensive to bring a new product

to market. Firms do not want to undergo this expense
only to discover that there is no demand.

But how can they know? By now you should be able

to guess. They use sample surveys and sample test
markets and try to infer from the product’s
acceptance in these samples how it will fare with the
larger population.

Again, there is no guarantee that the sample result

will carry over to the whole population. Again,
though, they can control the probability of being
misled
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Advertising a product is expensive, too, and firms

want to target that advertising as effectively as
possible. Some mistakes would be obvious.

No one would advertise a denture adhesive on a

kids’ show. To get it right, though, firms need to learn
about their actual and potential consumers. They
might create a product with teenagers in mind, only
to discover that it is actually more popular with older
young adults.

That discovery would be important, since the media

that these two groups read or watch are different
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5. Quality Assurance

Look at a package of light bulbs. The package

makes a number of claims, including how long the
bulbs burn on average—perhaps more than 1000
hours.

How does the manufacturer know?

Hopefully, quality assurance testers do not burn all

the bulbs until they go out, or you would have a
package of dead light bulbs. Some claims about a
product cannot be verified for each unit, because
verifying the claim destroys the unit. Yet responsible
manufacturers, concerned for their good
reputations, want to be right.

What do they do?

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6. Health Care

Health care is a major business. Hospitals, clinics, and

their suppliers can save money by finding better
ways to manage patient appointments, schedule
procedures, or rotate their staff.

For example, an outpatient cognitive retraining clinic

for victims of closed-head injuries or stroke evaluates
56 incoming patients using a 42-item physical and
mental assessment questionnaire. Each patient is
evaluated independently by two experienced
therapists.

Are there statistically significant differences

between the two therapists’ evaluations of incoming
patients’ functional status? Are some assessment
questions redundant? Do the initial assessment
scores accurately predict the patients’ lengths of
stay in the program?
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an experimental drug to treat asthma is given to 75

patients, of whom 24 get better.

A placebo is given to a control group of 75 volunteers, of

whom 12 get better.

Is the new drug better than the placebo, or is the

difference within the realm of chance?
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6. Purchasing

Retailer’s shipment of 200 DVD players reveals 4 with

defects. The supplier’s historical defect rate is .005.

Has the defect rate really risen, or is this simply a

“bad” batch?
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7. Operation Management

The Home Depot carries 50,000 different products. To

manage this vast inventory, it needs a weekly order
forecasting system that can respond to developing
patterns in consumer demand.

Is there a way to predict weekly demand and

place orders from suppliers for every item, without an
unreasonable commitment of staff time?
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Mini Case : How do you sell Noodles with Statistics ?

Noodles & Company introduced the quick casual restaurant concept, redefining the standard for
modern casual dining in the United States in the 21st century. Noodles & Company first opened in
Colorado in 1995 and has not stopped growing since. As of June 2014, they had over 400 restaurants

Noodles & Company has achieved this success with a customer-driven

business model and fact-based decision making

 Should we offer continuity/loyalty cards for our customers?

 How can we increase the use of our extra capacity during the
dinner hours?
 Which new city should we open in?
 Which location should we choose for the new restaurant?
 How do we determine the effectiveness of a marketing
campaign?
 Which meal maximizes the chance that a new customer will
return?
 Are rice crispiest related to higher sales?
 Does reducing service time increase sales?
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Questions
Give an example of how statistics might be useful to the person in the scenario.

a. An auditor is looking for inflated broker commissions in stock transactions.

b. retirement planner is studying mutual fund performance for six different types of asset
c. An intranet manager is studying e-mail usage rates by employees in different job classifications
d. A personnel executive is examining job turnover by gender in different restaurants in a fast-food
chain.
e. An automotive purchasing agent is comparing defect rates in steel shipments from three
vendors of steel.
f. A plant manager is studying absenteeism at vehicle assembly plants in three states.
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Questions

Many college graduates will not use very much statistics during
their 40-year careers, so why study it?”

a. What problems arise when an employee is weak in quantitative skills?

b. List several arguments for and against this statement. Which position
do you find more convincing?
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Imperfect Data and Practical Constrain

In mathematics, exact answers are expected. But statistics lies at the messy interface
between theory and reality

The crash tests are expensive and time-consuming,

so the sample size is limited. A few observations are
missing due to sensor failures in the crash dummies.
There may be random measurement errors.

If you are the data analyst, what can you do?

You can use statistical tests to detect unusual data points or to
deal with missing data. You can give a range of answers under
varying assumptions. Occasionally, you need the courage to say,
“No useful answer can emerge from these data.”

Telephone surveys can’t ask a female respondent whether or not she has had an abortion (sensitive question).
We can’t test everyone for HIV (the world is not a laboratory). Survey respondents may not tell the truth or may
not answer all the questions (human behavior is unpredictable). Every analyst faces constraints of time and
money (research is not free).
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End of session